COMMISSIONER OF INCOME TAX Vs. PRABHABATI BANSALI

JUDGEMENT

(1.) We are concerned in this reference with the assessment year 1970-71. The assessee is one of the co-owners of the house property known as Radia House situated in Bombay. She had one-eighth share in the said property. A part of the building, viz., two-thirds of the total floor area, has been in occupation of the tenants under certain lease agreements and the remaining one-third of the building has been in the occupation of the licensees under " Leave and Licence " system which has been in vogue in the State of Bombay. It appears that the said system has been adopted by the house-owners so that the occupants could not claim statutory protection under the Rent Control Act and they could be evicted by the owners at their will. It further appeared before the Tribunal that under this system the licence for occupation was generally given for a period not exceeding 11 months so that there might not be any possibility of the transactions being construed as lease. As per the particulars furnished by the assessee, the area in the occupation of such licensees under the " Leave and Licence " system was 11,159.56 sq. ft. as against the area of 19,787.44 sq. ft. in the occupation of the tenants under regular tenancy agreements, the actual area of the building being 30,947 sq. ft. The actual receipts per year from the licensees by way of licence fees were Rs. 1,58,511.20 as against Rs. 86,036.86, being receipts from the tenants. The total receipts from both categories of occupants were Rs. 2,84,548.08. While furnishing these figures of actual receipts, the assessee claimed that the annual value should be determined not with reference to the actual receipts but with reference to the fair rent. It was claimed that the sum of Rs. 86,036.86 being the rent received from the tenants for the portion of 19,787.44 sq. ft. in their occupation represented fair rent or rent which that portion might reasonably be expected to fetch and the fair rent which the portion of 11,159.56 sq. ft. in the occupation of licensees might be estimated proportionately at Rs. 48,544.09 as against the actual receipts of Rs. 1,58,511.20 realised from those licensees for that portion. The assessee thus claimed the gross annual value of the property to be fixed as Rs. 1,34,580.97 (Rs. 86,036.86 plus Rs. 48,544.09).

(2.) The ITO, however, did not accept this claim of the assessee. He took the actual receipts of Rs. 2,84,548.08 from both the tenants and the licensees as the annual value of the building and after giving the statutory deductions, determined the income from the house property at Rs. 1,70,916. He assessed one-eighth share thereof, that is to say, at Rs. 21,356, in the hands of the assessee, she being the owner of one-eighth share of the property.

(3.) Being aggrieved by the said decision, the assessee went up in appeal before the AAC. Before him, it was contended by the assessee that what was paid by the licensees for the portion in their occupation was in the nature of compensation and it could never be equated with the fair rent and that the net rateable value of the building, as fixed by the Bombay Municipal Corporation, should form the basis of computation of the annual value of the building under the I.T. Act, 1961. In support of this contention, reliance was placed upon the order of the Bombay Bench Tribunal in two other appeals and reliance was also placed on certain observation of the Supreme Court in the Case of Nalinikant Ambalal Mody v. S.A.L. Narayan Row, CIT, that in some cases the actual receipts from the property might be in excess of its annual value. On a consideration of the submissions made before him, the AAC held as follows :